Most of us wouldn’t think about not having homeowner’s, health and auto insurance. They are everyday staples in today’s society. However, many overlook the advantages of what is known as a Personal Umbrella Policy (PUP). It is probably the most misunderstood and under-appreciated form of insurance available.
In short, a personal umbrella policy is extra liability insurance. It is designed to provide protection beyond the limits of your auto, home or boat policies. It also provides coverage for claims excluded by other policies such as libel, slander and lawsuits related to rental property that you own, none of which are generally covered by other types of insurance policies.
An umbrella policy, however, doesn’t cover everything.
While the name of the policy suggests it covers a broad range of events—seemingly everything—there are limits. It does not cover damages to personal property, contract disputes, business-related settlements or intentional or criminal acts.
So that leaves the question: Who is covered?
An umbrella policy is generally designed to protect you, your spouse, dependents and any relatives living with you. The caveat is that it isn’t likely to cover any who have auto or other policies in their name. For example, your mom living with you might not be covered under your PUP if she has an auto policy in her name. So it is a good idea to check into these things before you get an umbrella policy.
If you do get one, coverage typically extends beyond incidents at your home. For example, if you were traveling outside the country and damaged another vehicle, your PUP would likely cover the damages beyond your auto policy’s limits. And, since coverage tends to come in increments of $1 million, it is surprisingly reasonable in cost.
Unfortunately, we live in an increasingly litigious society. If you have an asset base worth protecting, you should seriously consider the merits of owning this type of protection. Feel free to consult your financial or insurance advisor for its applicability to your specific situation.